Hello! It’s been 2 months since I started this blog! Thanks to all who’ve read along so far. I promise to do my best to create useful content for you all.

As I mentioned in my last post, most mutual fund managers fail to beat the market 96% of the time. They also invest your money with 0% risk to themselves and take a portion of your gains with high IMFs and MERs. What do we do then, if we want to invest our money into stocks but don’t know how to start? One way to get your feet wet is by going into index funds. Index funds are a way to start investing with less risk as your money is spread across the entirety of the market. So, if you bought into a technology index fund you’re buying into all the stocks in that fund and not just a single stock. Diversification is the name of the game here, as we don’t want to put all our eggs into one basket. Sure, that one stock MAY be a winner, but unless you have some insider knowledge (which is illegal) you won’t know for sure and are taking a huge risk. Spreading your risk among many stocks lowers your overall risk and is a safer and less heart-attack inducing method to grow your money.

Which index fund should we invest in is probably your next question. There are so many options! Tony Robbins references a strategy in his book by famed hedge fund manager Ray Dalio which is called: “the all weather” portfolio. It’s basically an investing strategy that has made money more than 85% of the time in the last 30 years. Now, the actual formula is a closely guarded secret as it’s how Ray Dalio became such a successful investor. He is one of those unicorns who don’t take on any new clients. He was kind enough to describe the breakdown of where to invest your money to Tony. I won’t share the breakdown here, mostly because I don’t remember it off the top of my head, but it amounts to having a diversified portfolio of index funds. So, now you’re probably wondering what’s a good example of a diversified portfolio of index funds that’s low cost? And the answer to that is: the TD E-Series index funds!

Just a quick disclaimer: I am in no way affiliated with TD or any sort of money managers. What I’m talking about is my own experience and from seeing how well the funds did in the past.

So the TD-E-Series index fund is an online fund so you can’t set it up inside the bank. You need to open a mutual fund account and then convert it to TD e-series or convert an existing RRSP account (I personally did both). Note: When I opened a mutual fund account I had to put some money into it, the person at the bank wouldn’t let me open it without committing to depositing some money into the account.

Next I had to fill out this form: https://www.tdcanadatrust.com/document/PDF/mutualfunds/tdeseriesfunds/tdct-mutualfunds-tdeseriesfunds-convertaccount.pdf

Put in your account info and options like pre-authorize purchase (great option for those who want to set it once and forget about it). Mail it to the address indicated in the form and after about 2 weeks you’ll receive a letter indicating that your e-series account is ready for use!

You can now login and start purchasing your funds. Like I mentioned above, I’m a fan of setting it and forgetting it. There are a few e-series funds you can invest in, but I am only going to talk about the ones I know about and currently purchase. These 4 funds are:

1. TD Canadian Index-e
2. TS US Index -e
3. TD International Index -e
4. TD Canadian Bond Index -e

There are multiple ways you can allocate your money in each of these funds depending on your risk tolerance; the more risky ones obviously yield bigger profit/loss scenarios. A simple method that I use is referred to as the Assertive model by the Canadian Couch Potato (a Canadian investment blog I follow) and it involves allocating 25% of your income to each of these funds. So I put equal amounts in each fund every month. An assertive approach has yielded as high as a 11.23% gain and a low as high as -24.54% with a 20 year average return of 5.95%! Compare that to a high interest savings account and your probably only going to be getting 2% interest but with pretty much 0% risk. So, you have to be prepared that there might be some years that your account doesn’t do so well. But if you stay the course and remember that the market always bounces back i.e. don’t sell off your stocks on down years over the long run you will be ahead at an average of almost 6% returns. The MERs for these funds are low as well: .33% and .35% for the Canadian and US equity funds respectively and .50% and .51% for the international equity and Canadian bonds respectively.
Using this strategy will set you up with a low-cost, broadly diversified portfolio! And you did it all on your own so you know where your money is going and can easily check it whenever you want. Now, I know you want to see this in practice, so here’s a look at how my e-series funds are doing for 2017 till now:

Overall, I made $503.85 last year from the interest. Not too bad for my first time investing eh? And this amount is going to go up next year, as my winnings from last year will be invested back into the account, tax free!

Side note: Depending on the year, you are only allowed to put a certain amount into your TFSA. It started at 2009 and had an initial maximum of 5000 you could put into your TFSA, which is carried over to the next year if was unused. So if you were alive at 2008 the maximum you can put into your TFSA at 2018 is $57,500 (source: Canada Revenue). Also, you can withdraw from your TFSA at any time and replace the money you’ve withdrawn at any time without a penalty i.e. you don’t lost that contribution space if you withdraw it. TFSA is such a great investment vehicle!

That’s all I have for now. If you want more details on investing in TFSA and e-series I’ll be happy to share with you beautiful people! Till next week!